India and Sri Lanka have finalised a long awaited Comprehensive Economic Partnership Agreement (CEPA) and expect it to be signed on the sidelines of the SAARC Summit to be held in Colombo early next month.
“We hope to have the CEPA signed on the sidelines of SAARC (South Asian Association for Regional Corporation) summit opening on August 1. This is India's first agreement within SAARC member countries,” Gopal K. Pillai, secretary in the Indian ministry of commerce and industry, told Indian media.
The agreement is the culmination of 12 rounds of talks at the level of Joint Secretaries and Secretaries of the two countries and finalised at talks led by Pillai and Sri Lankan Minister of Investment Promotion G.L. Peiris, he said.
Analysts see this as the latest effort by India to keep Sri Lanka within its sphere of influence and fend off growing Chinese economic influence in the island nation.
Commenting on the agreement which covers trade in the areas of goods, services, education and custom corporations that is expected to boost trade and open up services and investment sectors, Pillai said: “It is a good overall agreement in line with our engagement with the neighbouring countries. It will be fully operational in three years.”
The first country with which India entered into a CEPA was Singapore. Currently, India is in the process of negotiating similar trade agreements with Japan, South Korea, ASEAN and the European Union (EU).
India signed the Indo-Sri Lanka Free Trade Agreement (FTA) with Sri Lanka in 1999 and but that was limited to exports of goods.
Since the signing of the FTA, Sri Lanka's trade volume with India increased from $49 million to $516 million whilst India's trade volume with Sri Lanka increased fourfold from $549 million to $2.7 billion.
The two neighbouring countries expect the volume of trade in goods and services to rise from $516 million to $1.5 billion by the time CEPA is fully operational, in 2012.
“FTA is a win-win situation to both countries. We are really looking at increasing Sri Lanka's trade volume to 1.5 billion dollars by 2012,” said Pillai.
Commenting on the signing of the CEPA, Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL) President Nawaz Rajabdeen said it could be considered a graduation from the FTA with Sri Lanka standing to gain more than India.
Some political parties in Sri Lanka, including the Marxist Janatha Vimukthi Peramuna (JVP) are against the CEPA and feel even the FTA that is in place now favours India and disadvantages Sri Lanka.
Allaying the JVP’s fears, Rajabdeen said that some of the short comings of FTA would be corrected before signing the CEPA.
Petroleum products and transport equipment forms almost 50 per cent of the total Indian export to Sri Lanka, while primary and semi-finished iron and steel is also a fast-growing export item. Coffee, tea, edible oil, non-ferrous metal imports, spices and electrical machinery forms the bulk of Sri Lankan export to India.
